Global crude oil prices fell to their lowest in nine months on Tuesday, causing investors to declare they had entered a bear market. Prices fell by nearly 22% to a $43.23 a barrel for West Texas immediate crude from the year’s high in January – the cut-off point for entry to a bear market stands at 20%.
The falling prices are a result of overproduction in the United States, Nigeria and Libya, Reuters reported, despite the Organization of Petrol Exporting Countries’ pact with Russia to reduce supply levels in the first six months of 2017. Libya’s oil production has tripled over the last year to 885,000 barrels a day, reported The New York Times. This, combined with the hostile political climate in North Africa and West Asia has threatened exports, causing the supply glut. Nigeria and Libya were exempted from the Opec deal.
In February 2016, crude oil prices had crashed to $26 a barrel, causing dozens of shale companies to go bankrupt. While lower oil prices are good news for drivers, it bodes ill for the industry at large as stocks tumble and investor sentiment becomes pessimistic.